LEISA 21.2
LEISA Magazine • 21.2• June 2005
Microcredit, poverty and the environment
Michael Hooper and Menka Parekh
Thailand’s mountainous Khao Yai National Park has a history of poaching
and unsustainable agricultural practices. Through a community-led microcredit
initiative, however, local people are turning the situation around and showing
how creative microfinance can support both livelihoods and biodiversity.
Situated in northeastern Thailand, the park was established in 1962. It covers
2168 km2 of forested land and harbours many species of animals and plants. As
altitudes increase, evergreen forest gradually gives way to mixed deciduous
forest. Secondary forests dominate the park’s borders.
This part of Thailand is one of the poorest in the country. Low levels of income,
limited land management skills and lack of medical care characterize communities
in the region, especially those bordering the park. The agricultural potential
is low and economic options are few. Sub Tai village typifies this situation.
For many years, villagers depended on loans from an informal network of money-lenders
who often charged more that 60 percent interest and happily took farmers’
land and property if they could not pay back their loans. In this way many farmers
were driven onto public lands in the neighbouring park. Struggling with debt,
villagers increasingly resorted to poaching, illegal logging and land encroachment.
The situation in the park worsened and soil erosion and flooding intensified.
Escaping a downward spiral
The local Community-Based Integrated Rural Development Centre (CBIRD Centre)
realized that the problem of debt had to be dealt with if livelihoods and the
park’s biodiversity were to be protected. In 1985 – under the guidance
of Thailand’s Population and Community Development Association PDA and
the Wildlife Fund of Thailand – CBIRD Centre helped the community establish
an innovative credit cooperative open to all villagers: the Sub Tai Environmental
Protection Society (EPS). The EPS’s committee is democratically elected
and efforts are made to ensure that half the committee members are women. Its
goal is to promote sustainable income-generating activities and reduce illegal
use of park resources.
The credit system is part of a wider programme of enterprise support, capacity
building and sustainability training led by CBIRD Centre. Financial resources
and support are provided by outside organizations which collaborate both with
the PDA and the community. The Centre’s activities are intended to improve
livelihood sustainability and increase farmers’ capacity to repay loans
and help them remain solvent.
The microcredit system operates on quite simple principles: Villagers get loans
for ecologically beneficial and income generating activities if they do not
poach or log illegally. Annual interest rates range from 9 - 14 percent and
are established in collaboration with villagers through the EPS. Criteria for
selecting loan recipients include the viability of the proposed activity, repayment
capacity, and market demand. EPS also establishes what actions will be taken
if members fail to pay back loans or meet environmental criteria. Very few fail
to repay, however, because members wish to avoid embarrassment.
Beneficiaries of the microcredit system focus on mixed cropping and on cultivating
products with high market value but low environmental impact. An example of
such a mixed cropping system is the CBIRD Centre-supported Community Forestry
Management Programme, in which participants plant and harvest a combination
of hardwood and fast-growing tree species on marginal lands. This allows them
to obtain a consistent minimum income from the fast-growing species while the
high-value, but slow-growing hardwood species are given time to mature. A more
measured and sustainable longterm cultivation cycle also allows the land to
restore itself. The microcredit initiative also supports a system of local minifarms
for cultivating high-return products with low impact on the fragile mountain
environment. The most popular product is the oyster mushroom, the key ingredient
in many Lao curries. Because mini-farms are not as physically demanding as other
agricultural activities, many elderly, handicapped and HIV/AIDS affected members
of the community can become involved and obtain an income.
These are excellent examples of how microcredit initiatives can be interwoven
with wider efforts to improve incomes and sustainability by aligning environmentally
friendly agricultural products with the actual demands of the marketplace.
Working for the future
Since the initiation of the EPS, Sub Tai community has escaped from debt, doubled
its income as a group, and reduced illegal deforestation by 75 percent. Conditions
have been created that facilitate long-term conservation of the park. The Community
Forestry Management Programme is now being implemented in 134 other north-eastern
villages supervised by the PDA. Sub Tai community members are now able to turn
to mainstream private credit providers as their incomes and the financial well-being
of the community have improved. CBIRD Centre is now focusing on entrepreneurship
support and enterprise development activities, as local people make the transition
from the small-scale loans offered by the EPS to the mainstream Thai banking
sector. The Sub Tai experience shows how having confidence in the financial
abilities and credit worthiness of local people can help transform a community
from a state of economic dependence to one of financial independence and innovation.
In 2002, CBIRD Centre Sub Tai was one of 26 finalists for UNDP’s Equator
Prize 2002 – because of its work in reducing poverty through the conservation
and sustainable use of biodiversity. As a finalist the Centre was awarded US$30
000 for capacity development by the Equator Initiative’s partner, The
Nature Conservancy. The award was used for training and to further engage youth
in the work of the CBIRD Centre and to build sustainability education and activities
into the community starting with the very young with the future of coming generations
in mind.
A major challenge will be taking the successes the project has achieved in
the late 1990s and deepening them over the coming years. Questions of scaling-up
are critical and the CBIRD Centre will have to grapple with how to ensure that
successes will persist.
Michael Hooper. Programme Officer. The Equator Initiative.
United Nations Development Programme, The Chrysler Building, 405 Lexington Ave.,
4th Floor, New York, NY 10174, USA. Email: michael.hooper@undp.org
Menka Parekh. Programme Consultant. The Equator Initiative.
United Nations Development Programme. The Chrysler Building, 405 Lexington Ave.,
4th Floor, New York, NY 10174, USA. Email: menka.parekh@undp.org